TMC: Cost-conscious fleets should base fuel rates on actual costs

The firm has welcomed the new system of rates introduced by HMRC and declared it an improvement on the previous system.

However, following its analysis of the real fuel costs of hundreds of fleet cars, TMC says that using flat rate fuel expenses is costly for large fleets that run even averagely fuel-efficient cars. As an example, it says that relying on AFRs instead of paying drivers for business fuel at actual cost could add £36,000 per quarter to the fuel bill of a 1,000 car fleet that capped its CO2 at 160g/km and restricted drivers to cars chosen for low whole-life costs.

TMC's managing director, Paul Jackson, said: 'The cost penalty from using flat rates varies from fleet to fleet, according to vehicle mix, but it is typically 5% to 8% higher than the actual cost of fuel consumed.'

Jackson added: 'Businesses should recognise the AFR system for what it is – a convenience within the tax system. But it is not a fuel management option: it is an alternative to proactively managing company car fuel costs. The cost of fuel is now so significant, and the difference between flat rates and actual costs is so great, that large fleets need to ask whether they can afford to simply let the taxman tell them what they should pay for fuel.'